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Subscription bureaus – the Round Table report

Last week I chaired a discussion for iSUBSCRiBE where five of the leading subscription bureaus talked about the challenges they are facing and the associated opportunities for their business.

If you’re a publisher you’re either using a bureau to manage your subs or you’re doing things with in-house software. The massive (and possibly terminal) decline in newsstand means that subscriptions are increasingly important to your survival, and the fact that you have a one-to-one relationship with your customers is an opportunity for much deeper engagement (= you can find out more about your readers and sell them more and different stuff).

The discussion will be written up in a future edition of inPublishing, but there were some key points that came out of the conversation that are worth sharing now.

The first is to do with what bureaus charge publishers. We’ve seen the development of the bureaus from being the providers of a range of 20th century physical services – opening mail, banking cheques, answering ‘phones – to being the suppliers of software services. The old roles were “commoditisable”, the price being constantly driven down by competitive quotes, and bureaus operated on very low margins, relying on volume to make money. Supplying software services is potentially more lucrative, but the development costs are huge and many publishers remain in a 20th century mindset, regarding the bureau as something that needs to be constantly beaten down on price and being unwilling to fund new development for their titles. All the participants mentioned that their non-publishing clients paid more, yet still regarded the service as good value.

I’ve had conversations with publishers where they have admitted that they pay too little for their bureau services and that their (the publisher’s) future is compromised by the fact that the bureau isn’t getting a fair rate for their work, but short-term cost-saving imperatives take precedence over the longer term. The bureaus are aware of this, but they are also increasingly aware that publishers are now more deeply embedded into their bureau’s systems than in the past and so moving subs houses is more difficult. Expect to see the cost of the bureaus’ service increasing over the next few years – it’ll be tentative at first, but as the bureaus feel more confident the rates will increase quite significantly.

Another driver of this will be the diversification of the bureaus’ client base. At the moment there is overcapacity in the bureau market and there seems no prospect of consolidation, so for the bureaus to survive they are going to have to bring in non-publishing clients. It will be interesting to see whether any reach the point where publishers are less than 50% of their revenues, and how that further changes the bureau/publisher relationship.

There is also much more development of ‘modular’ services. We already see that with some companies using the bureau software to run the subs facility, but having their own customer service teams. It also works the other way, with (non publishing) clients using the call centre facilities for inbound customer service, with the bureau accessing those clients’ systems for information and updates. One of the round table participants said that it wasn’t fanciful to think of a magazine’s calls being answered at one bureau, the data entry at another and both feeding into a subs system at a third.

Another point is the increased notice paid to the bureau by publishers. In the past it was rare for senior management at publishing companies to be aware of the role of the bureau; now it is very rare for them not to be. When what the bureaus did was manage fulfillment services the joke was that the CEO would only ask about the bureau when a friend’s copy of the magazine didn’t arrive, but the integration of print and digital services, the testing of new products and new bundles, the increased demand on exemplary customer service means that much more attention is paid at a much higher level. That puts more pressure on both the bureau and on the subs team, as senior management want to know more about what’s going on, what’s being developed and what it’s costing.